EUR/USD is almost unchanged in the Tuesday session. Currently, the pair is trading at 1.2369, down 0.03% on the day. This is the pair’s highest level since the end of March. On the release front, German ZEW Economic Sentiment surprised the markets with a sharp drop of 8.2 points. This was much weaker than the estimate of -0.8 points. Eurozone ZEW Economic Sentiment also headed lower, dropping from 13.4 to 1.9 points. This fell well short of the estimate of 7.3 points. In the US, the focus is on construction numbers. Building Permits are expected to rise to 1.33 million, and Housing Starts are forecast to improve to 1.27 million. The markets will be listening closely as three FOMC members deliver speeches. On Wednesday, the key event is Eurozone Final CPI.
Syria remains a geopolitical hot spot, where a US-led missile strike destroyed three chemical weapons sites on the weekend. Predictably, Syria and Russia strongly condemned the attack, with Russian President Putin warning that the attack would lead to global “chaos”. Still, a Russian response is unlikely, despite the strong rhetoric. Investors did not show much reaction to the attack, as the markets had already priced in a strike. After the weekend attack, President Trump declaration of “mission accomplished” means that things will remain relatively quiet in Syria. However, further chemical attacks by the Syrian regime could trigger a response from the US and its allies, which could result in volatility in the markets, similar to what occurred last week.
The well-respected ZEW Economic Sentiment reports were surprisingly soft in April. The German reading of -8.2 showed pessimism on the part of institutional investors and analysts and marked the weakest reading since November 2012. The eurozone release of 1.9 was the lowest since July 2o16. The readings are surprising, as the eurozone economy has been performing well and key indicators have been steady. Investors will be hoping that these ZEW releases are one-time blips and that the May readings will be in line with recent releases.